Reference no: EM133109314

Question 1 - Award Plus manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month. Current production and sales are 7300 medals per month. The company normally charge $150 per medal. Cost information for the current activity level is as follows:

Variable costs that vary with number of unis produced

Direct materials $266,000

Direct manufacturing labour $288,000

Variable costs (for set-ups, material handling quality control and so on)

That vary with number of batches, 146 batches x $496 per batch $72416

Fixed manufacturing costs $275,000

Fixed marketing costs $175,000

Award Plus has just received a special one-time only order for 2700 medals at $96 per medal. Accepting the special order would not affect the company's regular business. Award Plus makes medals for its existing customers in batch sizes of 50 medals (146 batches x 50 medals per batch = 7300 medals). The special order requires Award Plus to make the medals in 27 batches of 100 each.

Calculate and enter the amount of incremental profit or incremental loss (show negative figure) in the answer block below:

Question 2 - Victor, a manufacturer of lawn mowers, predicts that it will purchase 720,000 spark plugs next year. Victor estimates that 60,000 spark plugs will be required each month. A supplier quotes a price of $74 per spark plug. The supplier also offers a special discount option: if all 720,000 spark plugs are purchased at the start of the year, a discount of 6% off the $74 price will be given. Victor can invest its cash at 8% per year. It costs Victor $13 to place each purchase order.

Calculate and enter the amount of opportunity cost of interest forgone from purchasing all 60,000 units at the start of the year.

Question 3 - Victor, a manufacturer of lawn mowers, predicts that it will purchase 528,000 spark plugs next year. Victor estimates that 44,000 spark plugs will be required each month. A supplier quotes a price of $108 per spark plug. The supplier also offers a special discount option: if all 528,000 spark plugs are purchased at the start of the year, a discount of 6% off the $108 price will be given. Victor can invest its cash at 5% per year. It costs Victor $8 to place each purchase order.

Calculate and enter the amount of difference in relevant costs of purchasing 528,000 spark plugs at beginning of year as against purchasing every month. A positive number would indicate that purchasing all at beginning of year is more costly; while a negative balance would indicate that purchasing monthly would be more expensive.

Question 4 - The Possum Transport Company produces bikes, skates and mopeds. Mopeds are not as popular as they used to be, and the company is considering dropping this product. Possum currently sells 10,000 mopeds per year for $41 each. Variable manufacturing and selling costs total $34 per moped. Fixed costs of $122,000 can be avoided if mopeds are not produced.

Calculate and enter the amount of increase or decrease (show negative sign in front of input number) if production of mopeds is discontinued.

Question 5 - Mane Street normally sells 4,000 economy-size bottles of shampoo for $9 per bottle. The cost to manufacture the shampoo is $4 per bottle. Further variable processing costs of $1.7 per bottle for the shampoo would convert it into a shampoo-condtioner, which Mane Street could sell for $15 per bottle. Variable selling costs are $1.1 per bottle for the shampoo, but for the shampoo-conditioner they would be $2.1 per unit.

Calculate and enter the amount of additional profit or loss (show negative sign in front of input number for loss) Mane Street would earn if processing further.

Question 6 - The Possum Transport Company produces bikes, skates and mopeds. Mopeds are not as popular as they used to be, and the company is considering dropping this product. Possum currently sells 10,000 mopeds per year for $42 each. Variable manufacturing and selling costs total $31 per moped. Fixed costs of $138,000 can be avoided if mopeds are not produced.

If Possum can increase the sales volume of mopeds to 14,000 units per year by spending an additional $21,000 per year on advertising, calculate and enter the amount of profit or loss (show negative sign in front of input) if Possum continue its moped production.